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company confidential
Certainty & Sustainability: The keys to
incentivising long term broadband
infrastructure investments in Asia
CTO Broadband Asia Forum 2016
Dominic P Arena
Group Chief Strategy & Marketing Officer
22 September 2016
2company confidential
3company confidential
PAKISTAN (2005)
12,000 km fiber
CAMBODIA (1998)
7.6m subs
First to launch 4G LTE
Smart-Hello merger (2012)
MALAYSIA (1998*)
12.3m subs
Leading mobile broadband provider
BANGLADESH (1995)
28.3m subs
Pending acquisition /
merger with Airtel
INDIA (2008)
181.9m subs*
Integrated pan-India
operator 2G/3G
NEPAL(2015/16)
13mil subs
Leading mobile provider
~2,100 towers
SRI LANKA (1995)
10.9m subs
First to launch 3G in S.Asia
Dialog-Suntel merger (2011)
Dialog TV- SkyTV merger (2013)
SINGAPORE (2005)
1.9m subs**
First to offer 4G LTE in ASEAN
INDONESIA (2005)
42m subs
XL-Axis merger (2012)
MYANMARAcquisition via edotco Group completed 4th Dec 2015 (75% stake)~1250 towers
edotco Group (2012)
Managing over 17,000 towers in 6 countries;
World’s 12th largest independent TowerCo
12th
GloballyAxiata Digital Services (2014)
Portfolio of 28 Digital businesses
21M MAUs; $200M in investment
At Q3 2016 Axiata is the second largest telecom operator in South Asia &
ASEAN, with over 310 million* customers & 25,000 staff in 10 countries+
*Comprises 290 million mobile and fixed network subscribers in 10 countries plus over 20 million MAUs of Digital Applications & Services (OTTs) in which Axiata holds direct equity investments
4company confidential
PEER GROUP (ASEAN & South Asia) – TOP 10 CUSTOMER REACH/BASE [Mn. Sims]
31.12.2015
193.6
82.6
99.0
110.0
154.9
171.9
194.0
255.5
274.0
507.8
MAXIS (incl. Aircel)
IDEA
TELKOMSEL
BHARTI AIRTEL
BSNL
RELIANCE
VODAFONE
TELENOR
SINGTEL
AXIATA
Regional Players Single Market Player
Source: Axiata Group Strategy, Informa WCIS Note: Vimpelcom 2010 incl. pro forma PMCL which was only consumated during H1-2011, Vodafone adjusted for India operations only
ASIA PACIFIC, excl. holdings below 19,9%
#7 #2+234 Mn Subs
41.0
24.1
30.0
36.8
39.8
39.9
47.9
53.3
55.2
164.5
TELKOMSEL
TELENOR
RELIANCE
BHARTI AIRTEL
VODAFONE
SINGTEL
AXIATA
PLDT
BSNL
AIS
31.12.2007
In terms of customer reach we have grown to become #2 in
the Region (ASEAN & South Asia)+
among regional
& major single
market players
Notes :
‒ Regional market is defined as ASEAN and South Asia
7th
2nd (now 310m)
5company confidential
Invested Capital +
Expenditure more than
44.5 BillionUSD
SELECTED ACHIEVEMENTS ACROSS THE GROUP
Creating more than
1.3 million Job
Opportunities
across Asia
BangladeshInvestment (2008-2015):
USD 3.3 bil~368,000 jobs created
~0.4% of GDP
Sri Lanka Investment (2008-2015):
USD 2.6 bil~112,000 jobs created
~1.3% of GDP
No. 1 FDI
CambodiaInvestment (2008-2015):
USD 0.5 bil~66,000 jobs created
~1.5% of GDP
Highest Tax-Payer
MalaysiaInvestment (2008-2015):
USD 10.1 bil~126,000 jobs created
~0.9% of GDP
IndonesiaInvestment (2008-2015):
USD 9.8 bil~195,000 jobs created
~0.2% of GDP
1995 1995
1998
1988* 2005
Year of Investment
Note : Investment in the forms of capital expenditure and operating expenditure
Source : KPMG Independent Analysis
* Incorporate in 1988 under TM, then sold to Axiata during TMI demerger in 2008; ** Purchase Enterprise Value representing 1.5x Book Value of Invested Capital
Axiata is recognised as a long-term investor & contributor to
national development in our markets (~1.0% of GDP)+
NepalInvestment (2004-2015)**:
USD 1.4 bil~2.4% of GDP
No. 1 FDI
Highest Tax-Payer
2016
6company confidential
Digital communications and connectivity (B2C and B2B Convergence – Fixed and Mobile)
Enabling infrastructure and platforms(Passive Infra., Active Networks, OTT/IoT & Analytics)
Digital applications and services(FinTech, Advertising, eCommerce, EduHealth, IoT)
We are focused on our Core Business which is defined as 3
Core Pillars addressing all aspects of the Digital Economy+
1
2
3
7company confidential
0.03
58
1.64
0.10
1.00
10.00
100.00
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Cost/GB Index (LHS) DL BW Index Data ARPU Index
Notes: Applies Nielsen’s Bandwidth Law driven by AR/VR, UHD, 5G and IoT; Data Pricing and ARPU analysed using Malaysia operator data 2012-15
Data Unit Price
& Cost Index
35x
Status Quo Connectivity Focus will Constrain Data ARPU Growth
30x
1 Gbps
per User1 Gbps
per Node
OTTs
Smart-phone
… Data/BW Driver
5-10 Mbps
per User
FMC HetNet
Video 4k UHD
Mobile 1st
IOTAR/ VR360
5GVideo 8k UHD
Our industry is now facing a ‘scissor curve’ challenging traditional
business models and network investment economics+
Social B-cast
0.7GB 8.5GB
Avg. Monthly
Usage Per Axiata
Data User
59GB /
500GB (FMC)
8company confidential
WACC Range
The new data-led reality is that network & industry economics more strongly
favour economies of scale, with implications for financing & shareholder return
Source: ATKearney – based on a global survey of 54 operators over past 3 years using Bloomberg, GSMA and operator data and Axiata Group Strategy Analysis
~17%
No. 1 No. 2
(Strong)
No. 3-4 No. 5
~12%
~5%
~ -4%
Long Term Investment Returns for Infrastructure Based Mobile Operators (%ROIC)
Economic Value Add
Economic Value Destruction
ROIC-WACC
has a 0.99
correlation to
share price (JP Morgan)
~7.5%
No. 2
(Weak)
Dilutive effect of
#2-3 fighting for
market share
(<10pp gap)
9company confidential
-4.00%
0.00%
4.00%
8.00%
12.00%
10 5 3 1
US Europe Asia Globally
-4.00%
0.00%
4.00%
8.00%
12.00%
10 5 3 1
Revenue CAGR
US Europe Asia Globally
+this is supported by the trend of Telecom revenue and profit growth slowing
(in Asia and Globally) over the past 10 years+
Revenue CAGR [1] Profit CAGR [2]
[1]: Revenue Growth Rates are extracted from GSMA and consist of 242 samples
[2]: Profit Growth Rate is calculated based company filings of 7 of the largest Telco Groups, All Data points are taken as of Q1 for years 2016, 2015, 2013, 2011, and 2006
10company confidential
Therefore, Certainty and Sustainability are the two key drivers
of long term Broadband infrastructure investment+
� Regulatory Frameworks
• Rational License Pricing (capital intensity, profitability) and Industry Specific Taxation (consumer purchasing
power)
• Convergence Regulation approach (eg. Fixed & Mobile RMS, TV, Digital Services/OTT/SSSR, Spectrum Neutrality,
Carriage vs Content)
� Return on Investment
• Sustainable market structures and supportive Regulation such as Spectrum Pooling / Trading, Active NetCo,
Mergers/Consolidation Rules
� Access to Capital
• Liquidity and depth of Local Capital Markets (access to debt and equity)
• Currency (monetary policy) stability and hedging instruments (risk management)
� Ability to Launch New Services
• Certainty of Spectrum Availability and Allocation (450/700/800MHz and 1500/2300/2600/3600/5000MHz,
800-900MHz and 2400MHz ISM for IoT / LTE-U) for LTE, IoT and 5G
• FinTech related licensing for telecom operators (payments, deposits, remittances, insurance)
• Spectrum Re-farming / Neutrality for upgrading to more efficient (lower cost, higher performance) technologies
